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H&M warns on sales after COVID-19 decimates annual profits

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Suban Abdulla
·3 min read
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WATCH: H&M warns on sales after annual profit plummets

Swedish retailer Hennes and Mauritz (H&M) has warned on its first quarter sales after the coronavirus pandemic decimated its annual profits.

Profits at the world’s second biggest fashion retailer dropped 88.2% to £179m ($245m) in the year up until 30 November 2020, and gross profit fell 23.6% to £8.15bn.

H&M (HM-B.ST) also warned that sales declined by almost a third in December and most of January due to coronavirus lockdowns.

Net sales in the same time period fell by 18% to £16.3bn, as sales development was “significantly and negatively” affected by COVID-19, particularly in Q2 when stores were temporarily closed due to lockdowns.

Approximately 80% of the group’s stores were closed, at the height of lockdowns. Currently around 36% of its stores are shut.

Approximately 80% of the group’s stores were closed, at the height of lockdowns. Photo: Vyacheslav Prokofyev\TASS via Getty
Approximately 80% of the group’s stores were closed, at the height of lockdowns. Photo: Vyacheslav Prokofyev\TASS via Getty

Sales in the seller of cheap chic, which has stores across 74 countries, were down 23% in the local currency. It had already reported a 10% fall in sales for the fourth quarter.

Despite the figures and warnings, the retailer’s chief executive Helena Helmersson said that the business will come out of the crisis stronger.

“With strong, profitable online growth and good cost control we succeeded in ending the year in profit and with a strong financial position. Taking decisive measures quickly, combined with an attractive customer offering, led to a better recovery than expected up until the second wave of the pandemic struck,” she said.

READ MORE: Boohoo confirms talks to buy three Arcadia brands

The coronavirus pandemic has meant that the retailer, which was struggling prior to the crisis, had to adapt from store sales to a surge in online sales.

It had already redirected its focus from high street expansions to online engagement prior to the pandemic, amid stiff competition from high street rivals Zara, Primark and online retailers Boohoo (BOO.L) and Asos (ASC.L).

Nevertheless, it is planning to open around 100 new stores this year. But, 350 stores are planned to close in the same period, mainly in established markets.

Additionally, it said its financial position remains “strong” with good liquidity, with its board saying that there are “good prospects” of a cash dividend in autumn 2021.

Boohoo and Asos have recently both confirmed “exclusive discussions” to buy the remaining retail interests of high street stalwart Arcadia.

According to Sky News Boohoo is leading the race to snap up Dorothy Perkins, Burton and Wallis for an estimated £25m ($34m).

Any deal would be for the brands and not the high street stores, and could wrap up Green’s remaining retail interests and the closure of all 444 stores in his retail empire.

Meanwhile, Asos is the frontrunner to acquire its Topshop, Miss Selfridge, Topman brands, as well as fitness brand HIIT. Asos will pay more than £250m ($343m) for Topshop, according to the broadcaster.

Arcadia's Evans brand was sold to Australia's City Chic for £23m last month.

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